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Stocks fell sharply in
June, ending the first half of 2010 with losses in every segment of
the equities market, except real estate. After a positive July,
the month of August was again negative. Most of the positive news for
the year-to-date has been in fixed income. The 2010 Morningstar
Annual Investment Conference reinforced our views on the best
strategies during this volatile period: opt for liquidity, not yield,
in cash reserves; maintain broad asset class diversification; use
discipline and patience, not emotion, in decision-making; keep the
faith in equities for the long term; exercise caution with
alternative investments. A high level of uncertainty about the
markets may be with us for years. However, remember that risk isn't
always a four-letter word; it presents opportunities for long-term
investors who are prepared to accept short-term volatility. We
continue to work diligently to ensure PFPG clients realize
competitive portfolio returns without taking on excessive risk.
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Maine's rethinking of Social Security
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Aspiring state
employees and teachers in Maine, who typically can't participate
in Social Security and must rely solely on the state's retirement
pension program (Maine PERS), will be watching the progress of a new
proposal by Maine legislators with great interest. The plan attempts
to reduce the burden on the strained state pension fund over the long
term by shifting future employees into the Social
Security system. The proposal
wouldn't impact Maine PERS benefits promised to current and
retireed state employees and teachers. The advantage to
employees would include having portable benefits should they move to
another state or leave state employment.
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Are my income taxes going up in 2011?
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We don't yet know the
answer to that question. Under current law, the 2001 and 2003
tax cuts are set to expire on December 31, 2010. The Obama
administration has proposed allowing the Bush era tax cuts to lapse
at year end for the circa 5% of households with taxable income
exceeding 200k (single filers) or 250k (joint filers).
Republican leaders have counter-proposed extending the tax cuts for
all tax payers for 2011 and 2012. Theoretically, the Democrats
and Republicans could arrive at a compromise in which at least 95% of
taxpayers would see their income taxes stay at the current levels in
2011 and 2012. However, politics are especially volatile
as November elections approach. One school of thought holds that
Congress won't get around to revamping income taxes, or estate taxes,
until 2011. More will be revealed!
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Finance bill has something for you
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Deep within the bulk of
the Dodd-Frank financial overhaul bill lie provisions that should
benefit the individual investor. The temporary increase from $100K to
$250K of FDIC insurance on bank deposits per depositor is now
permanent. The Comptroller General will be charged with reviewing
mutual fund advertising about performance data and recommending
changes to protect investors. More hedge funds will be required to
register with the SEC, making information about their employees,
business activities, and history of disciplinary activities available
on the SEC's website. Derivatives, which became a household word
during the financial meltdown, will be under government strictures to
cut potential risk. Shareholders will have a vote (though nonbinding)
on public companies' executive compensation, and increased access to
proxies for nominating directors. The SEC will have the authority to
impose a fiduciary standard on brokers, meaning brokers may be
required to provide advice in the best interests of the client (a
standard that PFPG and other members of the National Association of
Personal Financial Advisors have always upheld). Consumer financial
products will be under the watchful eyes of the newly established
Bureau of Consumer Financial Protection.
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Why financial plans are worthless
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We enjoyed Carl
Richards' article in The
New York Times, "Why Financial Plans
Are Worthless." It succinctly makes the case for financial
planning as an ongoing process that requires periodic revision and
readjustment to new circumstances. Since we don't really know what
will happen in the future, the first sensible step is creating a
vision of long-term goals and deciding what can realistically be done
in the short term to get you going in that direction. A comprehensive
financial planner will partner with you as you sail your ship across the
Atlantic hoping to reach the other side safely, with regular weather
checks, course adjustments, and tactics to handle the unpredictable
yet inevitable fair and foul conditions.
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Sincerely,
Thomas Rogers, CFP®
Brian L. Dietz, CFP®, CFA®
Debra Yoo
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